Advisors know data collection is a universal problem—one of our biggest challenges is getting an accurate data picture for each client. If the data you have is wrong or out of date, it affects your advice. Detailed data is a precursor to being able to offer good advice. However, your clients have to understand that need and find time to provide you with the details you want.
On this episode of the Elementality podcast, Chad and Reese discuss why the collection of good data is so difficult, why it is so important, and why technology probably offers the ideal solution to the issue.
Advisors are beginning to look to the Elements Financial Planning System™ as a leader in data gathering. In this episode, Reese talks about the reasons technology offers a solution to the data collection issue and why mobile phones may be the key to getting the data you need.
Podcast Transcript
Reese Harper:
We have people that struggle to spend. We have people that struggle to stay consistent and tend to speculate more than others. We have people that tend to sacrifice all of their wealth for their children and their family. These profiles, combined with financial data that we collect, is the foundation of advice delivery and we do ourselves and our clients a big disservice when we jump into advice prematurely.
Jordan Haynes:
Welcome to Elementality. I’m Jordan Haynes, Financial Planning Specialist at Elements. In this episode of Elementality, Reese and Chad talk about how to find balance in the data gathering process, specifically finding a healthy balance between gathering the information necessary to give good recommendations while not disengaging clients in the process. As you listen, consider how you can incorporate some of the principles discussed in this conversation and how utilizing mobile technology may solve both the timing and the accuracy of data gathering, resulting in improved efficiency for your practice and greater perceived value from your clients. Enjoy the episode.
Reese Harper:
Welcome to Elementality, everybody. I’m your host Reese Harper here with Chad “The Dad” Jardine for another episode. Looking forward to it. It’s been a exciting week, had a lot of great conversations with advisors. Chad, what have you prepared for us as the topic dejour?
Chad Jardine:
Yes. I mean, it feels like a little bit of a Julia Child intro, right? It looks like, wait till you see what I have cooked up for you today. No, this is a topic I’m really interested to hear what you have to say about. It seems like in the conversations that our team’s having with advisors, that everybody kind of has a universal problem, collecting data. Their job is data dependent. If I don’t know what’s actually happening with the client, I can’t advise them about it. Even worse, if the data that I have is wrong or out of date, that means that my advice is also fruit of a poison tree, so to speak. So what I’m curious about is your thoughts around the data dependency of the job of financial advisors, how reliant they are on good data, and then how do you get it? How do you get the client to give up the goods?
Reese Harper:
Well, we talked about this in a few episodes before, I think this season, it might’ve even been the first episode. If you guys want to go back to it, where we talked about standards, like the quality of advice that advisors are able to deliver. To me, that’s where this concept of good data is rooted is that I personally would love to see an industry where we’re not giving advice before we have data. Like, we’re not jeopardizing the life decision someone’s making before we have good information. We need to know not only their liquidity and their spending and their savings rate and their current net worth and the progression of their net worth, we need to know what their income to net worth ratio is. We need to understand what they’ve done with what they’ve had. We need to understand their personalities a bit more than we do.
Reese Harper:
There’s been a lot of research done on financial profiling and financial personalities from a few different people. Greg Allen Prince has done some work on this several years ago. We have people that struggle to spend. We have people that struggle to stay consistent and tend to speculate more than others. We have people that tend to sacrifice all of their wealth for their children and their family. These profiles, combined with financial data that we collect, is the foundation of advice delivery. And we do ourselves and our clients a big disservice when we jump into advice prematurely. So I guess I’m just starting out by saying data is absolutely essential and a precursor to advise.
Chad Jardine:
Is it actually realistic and possible to expect that you have 100% accurate data, that you have a 100% accurate picture of what’s happening with the client? Or is there some level of data accuracy that is sufficient?
Reese Harper:
Completely. So we can’t expect a 100% accuracy of information before we can start giving advice. Right? But we also can’t give the most precise advice until we have the most precise information. So I think it’s a question of grades. For example, in the current elements system, I can give my client access to sharing their facts, where they can download the app on their phone really quickly and they can input their general net worth. Most of our clients are able to do a net worth build in less than five minutes. So they can get it all in there, but it’s not live data yet. We’ve consciously designed the system to not require that at the beginning so that people can just get their basic facts in there and start the conversation.
Reese Harper:
But I’m not going to be comfortable giving advice until I’ve got more accurate, balanced data than an estimate. I only have so much confidence. When I see a client put an estimate in, I know how bad client estimates are. And so I’m not going to give specific advice about moving or allocating money until I’ve got more confidence in the data point. But if I see a data point that the client has entered that was very specific, like a $2,433, then I’m probably going to trust that piece of data a lot more because I know they consciously have put in something. If I see 100,000, then I’m going to be like, I’d be curious to know what plus or minus that is. And I don’t want to give advice until I know that.
Reese Harper:
So I would say that there’s value in estimates. There’s more value in precise data through account linking, but there’s also some data that requires documentation. So you have like an estimate with no documentation. Then you have like live data with documentation. And then you have an estimate, but with some documentation or no documentation. Any combination of these three. And the more data I have, the more confident I can become on a piece of advice I’m about to give, but I’m not going to hold that client up in our relationship just because they haven’t given me the precision I’m looking for. But if they’re missing something, I want to really understand that. So before I’ll even move forward, when I say, “I need all your data,” I just want to make sure that, that personal financial statement that they’re looking at on their phone, that they go, “That’s all I got, man. There ain’t nothing out there you don’t know about.”
Chad Jardine:
Yeah.
Reese Harper:
That’s basically what I’m trying to accomplish.
Chad Jardine:
Well, what do you think are the biggest challenges for financial advisors in having an accurate data picture? What makes it hard?
Reese Harper:
Number one, most of the consumers are not able to provide that information easily. It’s hard. So usually I have to be by my physical computer, my desktop-
Chad Jardine:
You mean like, I got to go to my filing cabinet where my tax returns are, or I have to go look at my insurance policies?
Reese Harper:
Yes. And usually, those requests are always going to be based on a proximity to your home and your computer at home. And you’ve got to be in an uninterrupted time to be able provide that to me. All of those factors, it’d be one thing if you’re just like, you just got to be home, which is already hard because you’re not home all the time. And then second, you’ve got to be kind of uninterrupted and by your computer and have a block of time ready. And I just think that that whole interaction is going to shift. There’s so many things in the world that require that to happen.
Reese Harper:
I mean, that I’ve got to be home, I got to be by a computer, I got to have time and space, I got to have access to things before I can do that job, there’s a lot of things in the world that require that. A lot of work, a lot of jobs require that, but that’s why cell phones came around. That’s why the mobile evolution has happened. And that’s why globally, there are more smartphones than laptops. We are evolving really quickly towards a world where the phone is more powerful than the desktop. And it’s always with me and it’s simpler.
Reese Harper:
And so I think that smartphones are going to help solve a lot of that because people have them with them wherever they’re at. The request to get data can be an estimate. If I could just get an estimate from you, that’s enough for me to take the next step. If I can just get this little piece of information, like what’s the phone number of the person? What’s the email address of this person I need to contact to get that information for you? Who is your attorney? Who is your CPA? Who is your life insurance agent? That stuff’s really easy to provide, but there needs to be a unified system, a consumer interface that’s easy. And right now in the past, the reason it’s been hard is we send people a big PDF, maybe it wasn’t designed that well, maybe it doesn’t make total sense. We send them like 100 emails to keep sending us stuff. It’s very de-motivating. It’s like, we don’t just say, this is what I need and this is your closure.
Jordan Haynes:
Do you ever wonder if you do enough for your clients to be worth what they’re paying you for? Do you feel like you’re delivering enough value? Many advisors wrestle with questions like these. I’ve used the Elements Financial Planning System for a couple of years now. With it, I can deliver periodic insight about a client’s financial health and progress by utilizing standardized measurements. They know I’m watching their progress and can actually see how my advice is improving their life. With the Elements Financial Planning System, you can also give your clients consistent planning guidance and the valuable advice they expect. Check it out at getelements.com/meet.
Chad Jardine:
So the format of this podcast is not a confessional.
Reese Harper:
Okay.
Chad Jardine:
So I’m just going to ask for a little forbearance right up front before I ask this question. Have you ever had a scenario where you had to walk back some advice because you’d given somebody a bad recommendation as a result of imperfect data?
Reese Harper:
Oh yeah. It happened this week. I mean, I did it like yesterday. So, I am talking to a client. This person tells me they need $20,000. Right? And they wanted to go and purchase some Bitcoin and some Ethereum from their Coinbase account. And they didn’t want to keep buying ETFs. And I was like, “That’s great. I’ll get you the 20 grand.” I’m kind of showing you an example, it didn’t turn out so bad, but it’s a good example here is when I looked at the profile, this person or our data entry had marked this account as a brokerage account and it was an IRA. And if it’s an IRA and you take 20 grand out, there’s taxes and penalties.
Chad Jardine:
You have penalties.
Reese Harper:
If it’s a brokerage account, it’s no big deal. And I’m talking to the client over the phone, they’re like, “Can I get some money out of my account? I just want to be able to buy my own Ethereum in Coinbase.” And we’d already had this discussion. And so I was just like, “Yeah, it’s fine.” Well, I mean, it didn’t end up happening because I caught it last minute, but if I was not provided with good information through what they were showing me, or if it’s our fault internally that we didn’t have the correct information input and maybe they did provide that correctly to us. That’s just a simple example. But yeah, that stuff happens all the time.
Chad Jardine:
Yeah. I was going to ask about that. This seems to be a headache for everybody.
Reese Harper:
Yeah.
Chad Jardine:
It is just not easy to capture the data in the first place and to keep it up to date.
Reese Harper:
Totally.
Chad Jardine:
This seems like an opportunity for either technology or other strategies to improve this. Where do you see data collection going in the future? If the problem persists, the pain gets bigger, I got to think people are trying to figure out good ways to overcome the challenge.
Reese Harper:
I don’t think that this problem is easily solved with better spreadsheets and more PDFs and back and forth email communication. I think it’s solved with technology and we’ll be one of many people that try to solve this. But when the consumer knows exactly what they need to provide to you, and it’s real clear, and it’s not confusing, and they’re looking at it from something as simple as their phone, and they know that they can estimate it, that they can give you a document, they can connect accounts, but it’s like, we’ve tried doing this for a long time in the last 20 years and it’s just getting better. We’re making incremental improvements. There’s a curve from gartner.com. I don’t know if you’ve seen this curve around the disillusionment of technology at solving our problems.
Chad Jardine:
As people get browned off at the idea that this could even-
Reese Harper:
Yeah. At the beginning of any technology, there’s this massive level of excitement that’s going to change the world. And then when people get it in their hands and they realize that it sucks and it’s not working-
Chad Jardine:
Yeah. The promise has failed.
Reese Harper:
Yeah. Then they get disillusioned and they’re not very happy with it. And then slowly over time as that technology gets feedback, and as that technology gets more resources, it has a chance to continue to adapt to feedback and then eventually be the thing that people had in their minds.
Chad Jardine:
Yeah.
Reese Harper:
But it’s a multi-year cycle of like, oh my gosh, this is going to change the world. This is the worst thing ever to… You’re at the bottom of that disillusionment cycle, you’re thinking like, same old crap. Windows Vista, here we go. Machines can’t do this job. Only humans can. Humans do some amazing things. There’s some things humans will be able to do that technology will never be able to do, like emotional, empathic advice. I’m sorry, computer’s a long way away from that. If you’ve tried Siri, she’s got hundreds of billions of dollars put into her and she’s still not the type of person you will trust with a question.
Reese Harper:
It’s going to take a long time, but I think humans are really good at advice. They’re just not really good at collecting data and organizing data and presenting data in a way that’s intuitive to the user, to the consumer. And so technology has a lot to say about that, but you have to be patient as it starts to grow. And most companies will run out of funding and people will get mad at them. And at the bottom of that disillusionment cycle is when most people fail because everyone’s like, you see, you weren’t what I thought you were going to be. And that’s precisely the time where the technology has a chance to continue to take the feedback and become what it needs to be, but it takes time.
Reese Harper:
And so, that’s it. I would just say the user interface has a lot to do with the future, I think of how data’s going to be organized and collected, which is a cool opportunity for advisors. They’ve got great technology that’s going to be developed to make the things we don’t want to have to do easier. And we will be able to trust our information better and have a future where we can just trust data more, but then we can focus on empathic advice, grade questions, exploring the right scenario for someone. There’s so many opportunities if we can get data under control to forage new ways to deliver advice that’s more impactful.
Chad Jardine:
Yeah. That’s awesome. Thank you. I feel like I have a much better understanding of what the world is that our customers live in, that financial advisors, what they’re up against in terms of just trying to capture and keep data accurate. Thank you.
Reese Harper:
Great question.
Jordan Haynes:
Next time on Elementality:
Stephanie Bogan:
Our biggest issue is that we are muddled in terms of what we really want for many of the reasons that you mentioned. I can’t, I don’t want to, and I don’t know how are the three biggest things I hear and none of them are viable in my world. I’m not asking you to jump off a building and not die, right? I’m saying you can double your income and your time off, no question. Period. End of story. It can absolutely be done. The question is, are you clear on the outcome that you want to create and are you in a headspace where you can make those choices in a way that moves you forward?
Jordan Haynes:
You can learn more about the Elements Financial Planning System at getelements.com/meet and schedule a time to meet with me, or one of our friendly financial planning experts. Elementality’s executive creators are Reese Harper and Chad Jardine. Elementality is produced by Abby Morton and directed by Jordan Haynes.